Additional information: 1. 2. 3. 4. 5. 6. 7. The following are comparative balance sheets for Vaughn Company. Assets Cash Accounts receivable Inventory. Land VAUGHN Company Comparative Balance Sheets December 31 Equipment Accumulated depreciation-equipment Total Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock ($1 par) Retained earnings Total 2022 Land was sold for its book value. $72,600 86,300 170,500 73,800 260,000 (65,900) $597,300 $35,400 151,100 214,900 195,900 $597,300 2021 $33,000 71,400 186,600 100,800 200,800 (34,100) $558,500 $47,000 204,000 174,700 132,800 $558,500 Net income for 2022 was $104,800. Depreciation expense was $31,800. Cash dividends of $41,700 were declared and paid. Bonds payable with a carrying value of $52,900 were redeemed for $52,900 cash. Common stock was issued at par for $40,200 cash. No equipment was sold during 2022.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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